“Showing the ‘right’ price can help consumers make more sustainable choices”

Showing the social and environmental costs on the price tag or a quality label for food at European level can help consumers make more sustainable choices. Companies in the agro-food chain also need to collaborate more across borders to create fairer rules of the game with equal standards so that sustainability can really get started.

This was stated by companies, authorities and consumers during the event ‘Action through insight: the fair and real price of food in practice’ on 25 May, writes ABN AMRO.

Many social issues, such as environmental pressures, fairer wages and animal welfare, come together in food production and arise throughout the chain, from farmer to supermarket. The questions are urgent and would rather be resolved yesterday than today, it sounds from the event participants. Calculating the ‘real price’ of food can help in the much-needed effort towards sustainability.

The real price – also called True Price – of a product is expressed by adding the social and environmental costs to the market price. The goal is to minimize these extra costs by producing more sustainably and fairly. The social and environmental costs give producers insight into where the costs are highest and where they can thus make the most of sustainability. For example, an entrepreneur can save water using technological solutions if it turns out that the environmental costs of using water increase the real price.

It must be the consumer
With the sign ‘Welcome to the first supermarket in the world with fair prices’, the founder of the supermarket De Aanzet, Maarten Rijninks, welcomes his customers. “Consumers are willing to pay more for more sustainable products,” says Rijninks, “but they need to know where the money is going.” On the other side of the board, De Aanzet announces that the extra money will be spent fairly. A modest contribution will go to indirect relief through Land Life Company and Give Direct, organizations involved in greenhouse gas equalization and poverty reduction, respectively. The vast majority goes to the field vegetable company De STEK in Lelystad and a farm De Almershof in Middenmeer, where a significant part of De Aanzet’s vegetables come from. “Direct remedy also reduces the hidden costs to customers over the years”. Rijninks is convinced that many consumers are willing to pay more for this.

The fact that consumers are willing to pay more for more sustainable products is not in line with the results of the study conducted by the Dutch Consumer and Market Authority (ACM). According to Caroline Wolberink of ACM, consumers are more likely to choose a cheaper common alternative than a more expensive but more sustainable alternative when they have the opportunity. “A major problem in sustainability is the limping willingness of consumers to pay more for sustainable products, nationally and internationally.”

That consumers actually prefer the cheaper alternative is also confirmed by food producers during one of the event’s workshops. According to the manufacturers, the focus on the lowest possible price is driven, among other things, by price comparisons between supermarkets in newspapers and magazines. This makes consumers even more bargain hunters, which in turn leads to supermarkets competing on price. A downward spiral, they conclude.

Supermarkets could use different shelf layouts or other nudging methods to direct consumers to products with the lowest social costs and thus stimulate the demand for more sustainable food, food producers believe. “The real price is a rather complicated concept. By allowing consumers to subconsciously make sustainable choices, this concept sometimes does not need to be fully explained.”

Rijninks would like to explain the concept. In this way, De Aanzet succeeds in getting consumers interested in more sustainable products and paying a higher price. According to Eva van den Broek from Transition Coalition Food and Behavioral Insights, this is not so strange. Experiments it has carried out have shown that consumers are actually willing to spend more money on food, provided they are presented as a matter of course and attractive, for which extra payment is now made, and where the extra price goes. “Consumers are more likely to be convinced by an attractive, preferably visual, representation of information.” For a number of products, De Aanzet shows on the price tag both the indicative sale price and the real price, which also includes costs for underpayment in the chain, climate tax, land use and water consumption, which customers pay at checkout. For example, a bundle of bananas at De Aanzet costs 2.94 euros per kilo, while the suggested retail price is 2.79 euros. Fifteen cents hidden costs less. According to Eva van den Broek, the real price is an intuitive concept. “By showing that such more sustainable products are the normal choice, consumers are more likely to choose them.”

Quality marks a solution
The statement ‘Certification organizations should simply include True Price insight into their criteria’, which is presented to a panel of experts during the event, is rarely contradicted. Panelists agree that a quality label can be a great way to communicate simply and easily to consumers. On the way to Planet Proof is an example of such a quality brand, like Organic, Milieukeur, ASC or Beter Leven.

But according to the panel, the current quality label system can be improved. For example, according to a number of panel members, the level differences between the quality brands are sometimes too great. For example, it is a significant step for farmers to go from 1-star Better Life to 2-star Better Life. The panel members would like to see if the steps in between could also be rewarded.

According to Richard Schouten from GroentenFruit Huis, there are too many quality brands. This can lead to confusion for both consumers and manufacturers. It is also not always clear what standards quality brands are based on. In order for market-driven sustainability to work more broadly, it is desirable that harmonization takes place in this area in Europe. European quality labels. “A fair playing field can be created by standardizing underlying measurement methods.” And that, according to Schouten, is necessary for the members who represent GroentenFruit Huis. After all, many of their products cross borders. “When sustainable efforts are measured across Europe with the same assumptions and in the same way, entrepreneurs and consumers can make more informed choices.” The presence of a level playing field rewards frontrunners for their sustainability efforts, which is necessary to continuously introduce new sustainability processes or innovations, says Schouten.

Reasonable price
Making food production more sustainable costs money, and the costs are usually highest at the beginning of the production process: with the farmer or the gardener. According to the ACM, the food chain can be depicted as a funnel. The farmers at the very top and in the narrow part of the funnel a few purchase combinations that bring the food out to the consumer. A simplified presentation to indicate that the market power lies with the supermarkets.

To ensure that the costs of sustainability are shared fairly, the Unfair Commercial Practices Act (UCP) has been introduced. Wolberink of ACM expressly refers to this law in its presentation. “The OHP Act provides that a supplier is protected against a customer who is greater in terms of turnover.” In law, it is possible to make agreements both horizontally and vertically to increase the level of sustainability. In this way, costs can be reduced and smaller manufacturers get a stronger position vis-à-vis their customers.

Even better than trying to enforce a fair distribution by law is to do so in consultation between all parties in the chain. Making the chain more sustainable will be a challenge in any case. Wolbering: “A transition to a more sustainable food chain is a path of obstacles.”

Source: ABN AMRO

Leave a Comment